Hindenburg and Jack Dorsey’s Block Trade Blows: Details
- Hindenburg Research released a report on Jack Dorsey’s Block, claiming to have seen internal documents and talked to the firm’s former employees.
- The report claims that Dorsey, along with James McKelvey, Amrita Ahuja, and Cash App manager Brian Grassadonia, sold over $1 billion in Block shares.
- Block was facilitating “fraud against consumers and the government” as well as “avoiding regulation,” claims the well-known short seller.
- Block responded by saying that Hindenburg profits from stock declines and is therefore trying to “deceive and confuse investors.”
- Dorsey’s company is also in talks with the US Securities and Exchange Commission (SEC) to explore legal action against Hindenburg Research.
Hindenburg Research, an organization known for preparing investigation reports on companies by going through their internal documents and public disclosures, recently released a report on Block, a publicly-listed company founded by Jack Dorsey, the co-founder and former CEO of social media platform Twitter. The organization claims that Block Inc. (previously known as Square) “systematically took advantage of the demographics it claims to be helping.” The research report was released after a two-year period of investigation.
As per the report released earlier this week, Hindenburg claims that Block was facilitating “fraud against consumers and the government” as well as “avoiding regulation.” The research firm claimed the company’s loans and fees were “predatory” in nature and designed to “mislead investors with inflated metrics.” Interestingly, the report cited interviews with former employees, internal documents, comments from industry experts, etc. as its sources.
The Hindenburg report also adds that Block “does not seem to offer a discernible edge” over its key rival platforms such as PayPal/Venmo, Zelle, or Apple, adding that the company sought non-compliance as a tactic to increase its user base. The research firm added that Jack Dorsey’s company was able to capture a very underbanked segment of the population, i.e., criminals.
It is crucial to note that Hindenburg claims that Dorsey, along with other insiders including James McKelvey, chief financial officer Amrita Ahuja, and Cash App manager Brian Grassadonia, sold over $1 billion in Block shares. The report added that the price of the company’s stock rose “on the back of its facilitation of fraud.”
Citing statements from former employees, the Hindenburg report claims that many people working in CashApp, a mobile payment service available in the UK and US, experienced pressure from the management and, as a result, had to loosen the Anti-Money Laundering (AML) and Know Your Customer (KYC) provisions.
“We also believe Jack Dorsey has built an empire—and amassed a $5 billion personal fortune—professing to care deeply about the demographics he is taking advantage of. With Dorsey and top executives already having sold over $1 billion in equity on Block’s meteoric pandemic run higher, they have ensured they will be fine, regardless of the outcome for everyone else.”
On the other hand, Block responded to Hindenburg’s report, stating that the organization’s investigation is factually “inaccurate and misleading.” In an update, the company said that it is working with the United States Securities and Exchange Commission (SEC) to explore legal action against Hindenburg Research.
The research organization is a well-known short seller that profits from a decline in stock prices. Block noted in the update that the company is known for “these types of attacks, which are designed solely to allow short sellers to profit from a declining stock price.” Dorsey’s new venture also said that it had reviewed the full report and concluded that it was designed to “deceive and confuse investors.”
“We are a highly regulated public company with regular disclosures, and are confident in our products, reporting, compliance programs, and controls. We will not be distracted by typical short seller tactics,” said Block.